Swiss-based hedge fund manager RMF Investment Management has launched a fund of hedge funds, RMF Environmental Opportunities Fund, which will invest purely in environment-related industries and strategies.
The fund, which will invest in clean technology, renewable energy, carbon and emissions trading and in water resources and infrastructure, is aimed at institutional investors and will target returns of Libor plus 8 to 10 per cent with medium-level volatility. It has been funded with USD18.1m in proprietary capital from RMF and USD7m from one of RMF's multi-strategy products.
According to RMF, the launch of the fund reflects the strength of interest in climate change and the demand for increased investment for development in these areas. RMF is a core investment manager of Man Investments, one of the world's largest hedge fund providers.
The fund distinguishes four sub-sectors in environmental investments: carbon and emissions trading (pollution credit aggregation, carbon markets and regional greenhouse gas markets); water resources and infrastructure (reducing and preventing toxicity in water, increasing efficiency in supply and distribution, water storage and water rights); clean technology (clean fuels, energy storage and efficiency); and renewable energy (wind, solar and biofuels).
The fund has been launched with six underlying managers with strategies varying from equity long/short to commodities and multistrategy offerings, a range that will grow to 10-15 holdings. The scope of the fund is global with a discretionary balance among strategies and regions.
RMF's new alternatives group, which has five members in New York, Switzerland and London out of RMF's total of 33 investment analysts, has focused its investment research and development efforts on the environmental sector.
This sector covers all activities that optimise the use of natural resources, reduce ecological impact, improve efficiency or arise from environmental regulation. Investments in this area concentrate mainly on the interrelationship between emission and toxicity reduction, renewable energy credits and energy efficiency.
Until recently, environmental investments were primarily of long-only character with long lockup structures. 'Environmental hedge funds offer great profit potential, but the challenge for us, initially, was to find enough liquid strategies with institutional-quality managers,' says Michelle McCloskey, head of RMF's new alternatives group.
'When we started looking at the market over a year ago, only a handful of these hedge funds existed. Over the past year, liquidity in both the equities and futures markets has increased dramatically and we have seen a corresponding increase in the number of fund offerings in the sector. With more than 35 hedge funds to choose from, we are now confident that the market is scalable and that the managers are here to stay.'
RMF, which is headquartered in Pfäffikon in Switzerland and has offices in London, New York, Singapore and the Bahamas, began as a hedge fund manager in 1992 and now manages more than USD25.4bn of assets, mainly for institutional investors. RMF is part of Man Investments, which has USD67bn in assets under management, centres in London and Pfäffikon and offices in Chicago, Hong Kong, Dubai, Montevideo, Nassau, New York, Singapore, Sydney, Tokyo and Toronto.